Inequality Causing Massive Loss for Our Social Security System

Is your salary less than $160,200? If so, you’re among the 94 percent of American workers who pay into Social Security all year long. But there’s a privileged group that’s about to stop paying into Social Security for the rest of 2023: People who make $1,000,000 a year. Their last day of contributing to Social Security is February 28.

That’s not even the worst of it. Tucker Carlson, who makes a reported $8 million a year, stopped contributing to Social Security on January 8. Joe Rogan, who reportedly makes $4 million a month, stopped contributing on January 2. Many billionaires receive all of their money in the form of bonuses and stock options. Elon Musk is the highest paid CEO in the world, but because none of it is wage income, he doesn’t pay a single penny into Social Security.

Right-wing politicians and cable news pundits frequently say that we “can’t afford” Social Security. Their solution? Cut benefits for working people who’ve paid into the program for our entire lives. They never suggest that we simply require the wealthiest people in America to pay into Social Security all year long, just like the rest of us. If we do, we can afford to not just protect but expand benefits.The Social Security Expansion Act, recently introduced by Senators Bernie Sanders (I-VT) and Elizabeth Warren (D-MA) along with its House counterpart, introduced by Congresswomen Jan Schakowsky (D-IL) and Val Hoyle (D-OR), would do just that. This legislation would require the wealthy to contribute into Social Security on all their income over $250,000 — including unearned investment income. It uses the additional revenue to increase Social Security’s modest benefits and keep the program strong through the end of the century and beyond.

Another piece of legislation, Social Security 2100: A Sacred Trust, is sponsored by Rep. John Larson (D-CT). This bill, which also lifts the cap on Social Security contributions and uses the revenue to expand benefits, had the support of about 90 percent of House Democrats in the last Congress.

The movement to finally require the wealthy to pay into Social Security all year long isn’t limited to Congress. President Joe Biden campaigned on lifting the cap and using the revenue for targeted benefit expansions. Polling shows that the idea has widespread support among the public, including 76 percent of all voters and 65 percent of Republican voters.

Unfortunately, Republican politicians are not listening to their voters. The Republican Study Committee, a group that counts 156 House Republicans as members, released a budget last year that would make massive cuts to Social Security benefits, including raising the full retirement age to 70. It does not lift the cap or otherwise raise a dime of additional revenue from the wealthy.

Republican politicians are focused on protecting their wealthy donors, who are paying less into Social Security than ever. The Economic Policy Institute (EPI) recently found that as inequality increases, a record share of all earnings are above the $160,200 cap on Social Security contributions.

In 1983, the last time Congress made major reforms to Social Security, they set the cap at a level that covered 90 percent of all wage income, leaving only 10 percent above the cap. But they didn’t count on the rising inequality of the last forty years. The percent of wage income outside the cap has nearly doubled — in 2021, nearly 20 percent of wage income was outside the cap. And that doesn’t even include unearned investment income, which accounts for the huge bulk of the income of the wealthiest!

EPI estimates that income falling above the cap due to rising inequality has cost the Social Security Trust Fund $1.4 trillion. That’s a massive windfall for the wealthy — and a massive loss for our Social Security system and the millions of Americans who rely on it.

Congress has the power to end this injustice. All it would take is Republican politicians listening to their voters, joining with Democrats to require the wealthy to pay into Social Security all year long and on all of their income. If they do, millionaires won’t exactly be celebrating next February 28 — but the rest of us will.